China extends fiscal interest subsidy for equipment upgrade loans

China's Ministry of Finance announced on Monday that the government's fiscal interest subsidy policy for bank loans for equipment upgrades will be extended until the central bank's relending facility quota is fully utilized.

As part of efforts to boost domestic demand and promote high-quality development, the ministry announced the policy in June 2024, following the State Council, or the cabinet's launch of an action plan in March 2024 to advance large-scale equipment upgrades and consumer goods trade-in programs.

Under the policy, eligible enterprises can receive an interest subsidy of one percentage point on equipment upgrade loans obtained from banks between March 7, 2024 and Dec. 31, 2024. The interest subsidy is available for a maximum period of two years.

According to the ministry's latest announcement, enterprises that signed loan and equipment upgrade procurement contracts before March 7, 2024, but whose loans were disbursed after that date, will also qualify for the interest subsidies.

In April 2024, the People's Bank of China, the country's central bank, established a special relending facility worth 500 billion yuan (about 70 billion U.S. dollars) to support sci-tech innovation, technical transformation, and equipment renewal.

This relending facility, which provides low-cost funding to banks, is designed to encourage increased credit support for small and medium-sized sci-tech firms in their early or growth stages. It also aims to finance technical transformation and equipment renewal projects, helping key sectors become more digitalized, intelligent, advanced, and environmentally sustainable.